By Charles Degen, Chief Development & Local Market Officer, Cardif Lux Vie
Private equity has seen exceptional growth in recent decades. This class of funds has now earned its place in an asset allocation for sophisticated investors, particularly in life insurance policies where it has become an impressive diversification tool.
Let’s start with some background. Private equity funds first appeared in the 1950s, although it was not until the 1990s that they really took off. Their aim is to raise funds and invest them gradually by acquiring strong, high-performing, unlisted companies, which they grow to create value for investors. This business model is now witnessing exponential growth, with investors increasingly interested in an asset class that by nature is invested in the real economy. At a time of volatile markets and low interest rates, these investment solutions are a real opportunity to seek sustainable and attractive performance decoupled from market fluctuations.
Owing to its flexible, modern legislative and regulatory landscape, which is ideally suited to these activities, Luxembourg has become a major hub for structuring private equity funds and processing risk capital transactions. The country now accounts for 10% of global private equity assets under management.
At Cardif Lux Vie, we are increasingly asked by our partners and their sophisticated investor clients to include these funds in our life insurance and capitalisation policies. Our unit-linked solutions are excellent asset structuring tools and allow clients to benefit from the numerous advantages in terms of asset protection, portability, deferred taxation and inheritance. Another one of their strengths is that they cover a vast investment universe (private equity, real estate, structured products, wide range of funds, etc.), which fits perfectly with the needs of clients today.
As a committed, innovative insurer, Cardif Lux Vie is working to make these non-traditional asset classes more accessible. Although often reserved for high-net-worth clients, they can open the door to greater portfolio diversification as part of a broader wealth planning and structuring approach. To do this, we are committed to playing a central role in developing this business within the market, working closely with key players in this ecosystem. In-house, we have developed real expertise in this area, with a results-oriented team offering cross-functional expertise. Our practices and guidelines for accepting these assets have also been reviewed to ensure that our offering is in line with the new market demand.
Beyond our company, the entire Luxembourg life insurance sector is accelerating its transformation in an unprecedented economic environment. New risks, new players, new applications… Market players must adapt swiftly to seize every opportunity and meet the needs of an increasingly sophisticated clientele. In this new era, demand is changing. That’s why Cardif Lux Vie is committed to the “democratisation” of private equity assets and is keen to share the wealth of its know-how with its clients and partners.